Podcast Summary
Lessons from Small Town Real Estate Investing: Exploring small towns for real estate deals can offer unique advantages and challenges. Stay informed, adaptable, and committed to find success.
Successful real estate investing is not limited to large metro areas, and small towns offer unique opportunities. Dylan Osman, a guest on the Bigger Pockets Real Estate Podcast, shared his experience of making deals work in small towns. He bought his first property, a triplex, in South Mississippi in 2020, just before the COVID-19 pandemic hit. Although the property was in poor condition, Dylan saw potential and learned valuable lessons from the experience. Despite initial challenges, including being fired from his job and living far from the property, Dylan persevered and found success. The key takeaway is that every market has its unique advantages and challenges, and investors should be open to exploring various strategies to find deals. Whether it's in a small town or a large metro area, the key is to stay informed, be adaptable, and remain committed to your goals.
Learning valuable lessons from a fixer-upper investment: Thoroughly research potential investments, estimate costs accurately, and seek guidance when necessary to minimize unexpected challenges and financial burdens in real estate investing.
Buying a fixer-upper property, especially as a new investor, can come with unexpected challenges and financial burdens. Dylan shared his experience of purchasing a triplex with significant issues, including tenants not paying rent and a lack of construction skills. He ended up investing around $53,000, including his own labor and some guidance from a partner, to renovate the property. Although he made a profit of around $13,000, he learned an invaluable lesson, estimating the experience was worth over $100,000 in education. This story highlights the importance of thorough due diligence, understanding the numbers, and seeking guidance when needed before diving into real estate investing.
Investing in Real Estate Passively and Securely: Accredited investors can join private real estate funds for passive income. Non-accredited investors can consider rental retirement or rent to own opportunities with immediate cash flow and equity growth.
There are various ways to invest in real estate passively and securely with little to no upfront capital. Rental Retirement offers opportunities to invest in new construction properties at discounted prices or with no money down. For accredited or high net worth investors, private real estate funds like PPR Capital Management provide a steady source of passive income without the hassle of property management. Additionally, companies like Integra Development Group offer rent to own opportunities with immediate cash flow, built-in equity, and a foolproof exit plan. Dylan, a successful real estate investor, shares his inspiring story of perseverance after facing financial difficulties and discovering the benefits of diversifying income streams and gaining control over his financial future.
Learning from entry-level jobs in real estate: Gaining hands-on experience in real estate through entry-level jobs can provide a solid foundation for a future career, even if the salary isn't high. Investing in smaller markets offers opportunities for growth, but challenges like finding reliable property managers and contractors can make the process more complex.
Gaining hands-on experience in the real estate industry through entry-level jobs is an invaluable investment in your future career. Dylan shares his experience of managing job sites for various businesses, which gave him a solid understanding of construction management without having to be the one swinging the hammer. This education served as a strong foundation for his real estate investing journey, even if the salary wasn't high. Another key takeaway is that investing in smaller, more affordable markets, like Mountain Home, Arkansas, and the GTR region of Mississippi, can be just as profitable as investing in larger cities. Despite the smaller population and fewer resources, Dylan emphasizes that there are still opportunities for growth and success. However, challenges such as finding reliable property managers and contractors in these areas can make the process more complex. Overall, it's essential to weigh the pros and cons and be resourceful when investing in smaller markets.
Scaling up to overcome small town challenges: To reach a sustainable and profitable real estate business in a small town, investors must scale up their portfolio to bring positions in-house, despite the initial challenges and inefficiencies of the 'dead zone'.
Investing in a small town comes with its own unique challenges, such as limited resources for contractors and property managers. To overcome these challenges, it's essential to scale up and grow your portfolio to a size where you can bring these positions in-house. This phase, known as the "dead zone," can be difficult and inefficient, but it's a necessary step to reach a level of operations that is sustainable and profitable. The speaker aims to reach a portfolio of 50-60 units in each market to achieve this goal. However, it's important to note that every investor's situation is unique, and the feasibility of reaching this scale in a particular town depends on factors such as market size and availability of commercial assets. The speaker, Dylan, has a portfolio of about 124 units spread across three markets, but only half of it is under his full ownership. He plans to continue growing his portfolio to overcome the challenges of the "dead zone" and build a successful real estate business.
Finding profitable deals is essential for scaling in real estate: To scale in real estate, find profitable deals, leverage partnerships, and explore creative financing options.
Finding great real estate deals was a key factor in Dylan's rapid scaling in the industry. By buying properties at significant discounts, Dylan was able to leverage partnerships, private investors, and other financing methods to recycle capital and grow his portfolio. In the beginning, Dylan relied heavily on partnerships, using his ability to find great deals to bring in investors and split the costs and profits. As he gained more experience and access to new financing tools, he expanded his tool belt and was able to take on more deals on his own. The lesson here is that finding profitable deals is essential for scaling in real estate, and partnerships and creative financing can help accelerate growth.
Improving multifamily living with fast internet and off-market deals: Fast internet services like Quantum Fiber and lead generation tools such as DealMachine can help real estate investors provide better living experiences and find profitable deals.
Enhancing the living experience for multifamily property residents can be achieved through fast and reliable internet services like Quantum Fiber, while effective lead generation tools such as DealMachine can help real estate investors find off-market deals. Moreover, tax savings are a crucial aspect of building a rental property empire, and 10/31 exchanges, facilitated by companies like First American Exchange, enable investors to defer capital gains taxes. Lastly, platforms like Redfin can assist both buyers and sellers in the real estate market by providing up-to-date listings, personalized recommendations, and competitive fees. Overall, these tools and strategies can significantly impact an investor's success in the real estate industry.
Building relationships with experienced investors and property owners for deals and connections: Connecting with older landlords can lead to valuable deals, insights, and connections in the real estate industry, especially during the retirement wave among landlords
Finding great real estate deals is crucial for scaling up investments, and building relationships with experienced investors and property owners is an effective marketing strategy. Older landlords, in particular, are willing to share their knowledge and expertise over a cup of coffee, potentially leading to deals, connections to other investors, and even private money lenders. While this approach may not be easy or fun, it's a simple yet powerful way to grow a real estate portfolio with minimal upfront cost. Additionally, with the ongoing retirement wave among landlords, this strategy becomes even more valuable.
Maintaining liquidity is crucial for managing risk in real estate investing: Keep at least 2-3 months' worth of expenses in reserve for unexpected expenses and maintain a balance between buying and selling properties to ensure a healthy cash flow
Managing risk in your real estate investment business involves focusing on building liquidity. In the early stages of investing, it's essential to keep some reserves for unexpected expenses, such as HVAC repairs or other emergencies. Having high debt but high liquidity is better than no debt and low liquidity. Newer investors often overlook the importance of liquidity and having cash on hand for business operations and unexpected expenses. A good rule of thumb is to have at least two to three months' worth of expenses set aside. It's also important to remember that keeping all investments and not selling some properties to generate cash can put you in a risky position. Having a balance between buying and selling properties is crucial to maintaining a healthy cash flow and operating a successful real estate business.
Managing finances effectively in real estate investing: Use separate bank accounts for operating and maintenance expenses, prioritize transparency and honesty with sellers, and maintain financial discipline to build trust and close successful deals
Effective financial management is crucial for real estate investors, especially during the scaling phase when cash flow can be tight. Dylan shared his experience of using separate bank accounts for operating and maintenance expenses to gain better visibility into his spending and ensure sufficient funds were set aside for future repairs and maintenance. He emphasized the importance of treating real estate investing as a people business and building trust with sellers by being transparent and honest. An example of a successful deal involved purchasing a house from a seller with concerns about the amount of work required and her living situation. By addressing her concerns and offering a fair price, Dylan was able to build trust and close the deal. Overall, Dylan's advice emphasizes the importance of financial discipline, transparency, and building strong relationships in real estate investing.
Profitable real estate investing in smaller markets: Flipping houses and small multifamily properties in smaller markets can lead to substantial profits and personal fulfillment.
Real estate investing, especially in single family and small multifamily properties, can lead to significant profits even in smaller markets. Dylan Osman shared his experience of flipping a house for potentially $80,000 in profit, which started as a plan to buy, clean up, and relist the property. However, the project evolved into a more extensive rehab, and they ended up with a successful flip. Additionally, Osman emphasized the personal impact of helping people in real estate transactions, which is more feasible in smaller real estate deals. He also mentioned his experience of providing discounted rent to a tenant in need, which was not possible in larger multifamily properties. Overall, Osman's story highlights the potential for financial gains and positive impact in smaller real estate deals.
